This article was written for the ConsensusDocs newsletter and first appeared here.

The U.S. Environmental Protection Agency (EPA) recently announced a series of significant changes to the rules governing the use of refrigerants in heating, ventilation, and air conditioning (HVAC) systems. These changes, which were promulgated under the American Innovation and Manufacturing (AIM) Act, are designed to phase down the use of hydrofluorocarbons (HFCs), a class of potent greenhouse gases.

The AIM Act: A Game-Changer for HVAC Industry

The recent changes to refrigerant regulations by the EPA signify a substantial shift in environmental policy that will have profound implications for the construction industry. For the construction industry, this means a transition to next-generation technologies that do not rely on HFCs. The AIM Act’s sector-based restrictions will affect a wide range of equipment, including refrigeration and air conditioning systems integral to building design and function.

Starting January 1, 2025, the manufacturing or importing of any product in specified sectors that uses a regulated substance with a global warming potential of 700 or greater is prohibited (40 C.F.R. § 84.54(a)). The specified sectors listed include R-410A, the most common refrigerant used in the HVAC industry. The installation of systems using a regulated substance with a global warming potential of 700 or greater in specified sectors is allowed until January 1, 2026, provided that all system components are manufactured or imported before January 1, 2025. See 40 C.F.R. § 84.54 (c). “Installation” of an HVAC system is defined as the completion of assembling the system’s circuit, including charging it with a full charge, such that the system can function and is ready for its intended purpose. See 40 C.F.R. § 84.52.

On June 19, 2024, the EPA Administrator signed an amendment to the regulations, allowing one additional year solely for the installation of new Variable Refrigerant Flow (VRF) systems where the components were manufactured in the U.S. or imported into the U.S. prior to January 1, 2026. This proposed rule has not been finalized yet.

Implications on the Construction Industry

According to the National Association of Home Builders, the new regulations could have code implications. Refrigerant lines that penetrate fire-rated floor assemblies may be required to be placed in a fire-rated shaft. Jurisdictions around the country are gradually updating their building codes to reflect the changes made in the model International Building Code (IBC), International Mechanical Code (IMC), and International Fire Code (IFC).

Under the regulatory scheme, the definition of “install” requires all units to be fully charged and operational by January 1, 2026. However, meeting this deadline may not be feasible. Suppliers have indicated that the newer EPA-compliant HVAC units will incur at least a 20% increase in materials cost compared to the non-compliant units. Additionally, if the building code mandates that the refrigerant lines be housed within fire-rated assemblies, this could lead to a rise in both material and labor costs. Furthermore, the newer HVAC units are believed to be larger than those currently specified, potentially necessitating the expansion of existing HVAC closets and enclosures across all U.S. project sites. Material and labor costs may be impacted, along with potential cancellation fees for current orders.

Preparing for the Transition

Construction companies can prepare for the transition to new refrigerants required by the EPA under the AIM Act by actively planning and coordinating with suppliers and installers. This involves ensuring an adequate pipeline of equipment compatible with the new A2L refrigerants. It is crucial for construction companies to engage with equipment manufacturers to understand their roll-out strategies and timelines for the new refrigerants. Since A2L refrigerants are classified as lower flammability than current HFCs, companies must also prepare for potential redesigns in HVAC equipment and updates in installation instructions to address the slight increase in flammability.

To avoid potential bottlenecks, delays, and last-minute change orders, construction companies should begin the transition process well in advance. This includes coordinating switch-over timelines with vendors and installers, ensuring a sufficient supply of existing equipment before the switch-over, and securing new equipment after the switch-over. It’s important to note that old and new equipment may not be compatible unless specified by the manufacturer.

Preparations for the EPA’s refrigerant changes require construction companies to plan ahead, collaborate with industry partners, adapt to new technologies, and stay updated on regulatory developments to ensure a smooth transition and compliance with the AIM Act.

For more information, please reach out to Stefanie A. Salomon and Nadia Ennaji.